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On top of his current pay deal, the banker also has a shares-based bonus deal over three years that could be worth £20million at completion.

Barclays said the payments were benchmarked against a peer group of other global banks and financial services firms.

Paul Kenny, general secretary of the GMB union, said the appointment was 'insulting'.

He said: 'These are the bankers who caused the recession sticking two fingers up at the taxpayers who rescued them.

'This is about as insulting and divisive as it gets. A person who
poured petrol on the flames of the fires in the financial system has
been rewarded rather than been punished for what he did.'

Heading for Government? HSBC chairman Stephen Green is tipped to become Trade Minister in the coalition

Known to be a tough operator, Mr Diamond profited from the collapse
of Lehman Brothers, acquiring assets such as client lists from them on
the cheap.

In June, he was forced to defend his company in a
U.S. courtroom against allegations his bank got an unfair windfall
worth billions of dollars when it bought parts of the collapsed Wall
Street Bank.

DIAMOND'S POLISHED CAREER IN BANKING

Born in Concord, Massachussetts, in 1951

Attended Colby College, Maine, majoring in economics. Graduated 1974

MBA from the University of Connecticut. Graduated first in class 1977

Lecturer at the School of Business, University of Connecticut 1976-77

Managing Director and Head of Fixed Income Trading for Morgan Stanley International, spends13 years with the firm

Chairman, President and Chief Executive Officer of CS First Boston Pacific, based in Tokyo. Responsible for Investment Banking, Equity, Fixed Income and Foreign Exchange for Pacific region

Vice-chairman and head of global fixed income and foreign exchange at CS First Boston, based in New York

Joined Barclays in 1996

President of Barclays plc and chief executive of corporate and investment banking and wealth management, comprising Barclays Capital, Barclays Corporate and Barclays Wealth

More recently, Mr Diamond played an increasingly powerful role in matters outside the range of Barclays Capital, the firm's investment banking arm.

A staunch conservative and close friend of Boris Johnson, he was said to have been the driving force behind the London mayor's high profile cycling initiative, in which Barclays paid to plaster its name and logo on public bicycles all over the capital.

The father-of-three advises Mr Johnson and currently sits as a trustee to the Mayor's Fund for
London.

He has very little experience of retail banking - which will worry figures in the Government at a time when banks are under pressure to reform their lending policies toward small businesses.

David Cameron's official spokesman today refused to comment on Mr Diamond's appointment.

He said: 'This is completely a matter for the board of Barclays. It is not an issue for the Prime Minister.'

City analysts said the appointment showed the bank would not bow to Government pressure and was good news for the City.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said:
'His leadership in acquiring Lehman Brothers' assets at the height of
the global banking crisis was both brave and, with hindsight, positive,
with the strengthened investment bank leading the group's subsequent
recovery.'

David Buik, of BGC Partners, added: 'Though Bob Diamond comes from an investment banking
background, above all else he is brilliant delegator, and, let's face
it, the art of good management is delegation. He is also a supreme
motivator and a bold man.

'I would be fairly comfortable that this is now a strong bank
which will hopefully take a lead in the recovery of the UK's economy.'

British Bankers' Association chief executive Angela Knight said: 'With Bob Diamond taking over the helm from John Varley there
will be welcome continuity from a formidable team which steered one of
the UK's leading financial institutions safely and successfully through
the recent global financial problems.'

Barclays chairman Marcus Agius said: 'Barclays has been extremely
fortunate to have had a banker of John's quality at the helm since he
took over in 2004. It is equally fortunate to have an internal successor of Bob's calibre to succeed him.'

It was confirmed this lunchtime that HSBC chief Mr Green is becoming a minister, despite widespread speculation in the City.

David Cameron failed to persuade former banker Lord Davies to stay on in the job and has been struggling to find a replacement.

Mr Green, 61, joined HSBC in 1982 and went on to become chief executive. He has been chairman since 2005.

HSBC is one of the few major banks to emerge from the recent financial crisis relatively unscathed and did not need a Government bailout.